With req return 6% and Std dev 12%, why they have selected portfolio with Risk free and portfolio 5? There is no where mentioned that they can take levarage? In Q- 3A - They took combination of portfolio of 4 and 5 as per corner portfolio. Please help here
theyu havent taken leverage in part b they are using mean variance analysis in which they selcet the corner portfolio with the highest Sharpe ratio and combine with the RF asset to get the appropriate risk and return
so in question 3A - it says using mean variance analysis then why did we take portfolios 4 and 5 instread of Risk free rate?
hmmm see your point i jus interpreted it based on the fact that before the only concern was on return but in the part b your are controlling for both return and variance…if anyone else would like to take the mic dont be shy step forward
pup its on the 2006 exam also this time they use only corner portfolios ( at least i think so i havent had a chance to check their answers yet). if i come up with anything i will let you know
i checked 2006 exam and it shows only 2 main corner portfolios. CFAI is contradictory and confusing.